Govt advised to establish credit rating bureau

[Kamundu]

The government has been urged to set up a credit rating bureau to enable small and medium entrepreneurs as well as individuals to access financial services easily.





The need becomes of urgency given the fact that currently the banks and other financial institutions were operating without any guidance on loan issuance.
This was revealed on Wednesday by Ray Kaijage, Barclays bank Head of Products that there was need for the government to ensure that a system was put in place for bankers to get comprehensive information on the background of the borrowers before issuing loans.
He said a credit bureau would help banks and other financial institutions to manage the risks associated with loan borrowing.
“We need the government to set up the bureau because majority of the local communities, SMEs as well as small traders do not have collateral to enable them to secure loans from the banks,” he said.
A credit rating bureau could also be used to store information on consumer, seek loan facilities from banks or other financial institutions, he said.

 

[Shamu]

We dont have a better system to establish cradit rating. First, our government is run by corrupt leaders. Second, we dont have a better information system to establish, credit bereau. In addition, rich people, and corrupt leaders will be able to influence their credit score in order to maintan financial advantage.
The only solution I can think of it, may be if we let Americans, or EU, to run our credit bereau from their countries, which is nonesense.

 

[minye]

Who are beneficiaries of credit rating? the poor or rich?

Credit ratings do not measure performance factors, such as market value or price fluctuations, and they do not address, explicitly or implicitly, whether:

• Investors should buy, sell, or hold rated securities
• A particular rated security is suitable for a particular investor or group of investors
• A security is appropriate for an investor’s risk tolerance
• The expected return of a particular investment is adequate compensation for the risk it poses
• The price of a security is appropriate given its credit quality
• There is, or will be, a ready liquid market in which the security may be bought or sold
• The market value of the security will remain stable over time

While credit quality is an important consideration in evaluating an investment, it cannot serve as the sole indicator of investment merit. In evaluating an investment purchase, investors should consider a wide range of factors, including the current make-up of their portfolios, their investment strategy and time horizon, their tolerance for risk, and an estimation of the security’s relative value in comparison to other securities they might choose. By way of analogy, while reliability may be an important factor in identifying automobiles that drivers will consider owning, it is not typically the single criterion on which drivers base their purchase decisions.
While the initial credit rating assigned to a debt issue, and any subsequent changes to that rating, may affect the price an investor is willing to pay for that debt issue, credit ratings are just one of many factors that the marketplace considers when evaluating debt securities.



It is more speculative rather than physical investment and production. Our environment, including bad system does not favour credit rating bureau.

 

[Kamundu]

Long term debts and low interest rate are important for any economy to expand but Tanzania lacks both!. This is because of
(a) Land Ownership: All Tanzania Land is owned by the government, hence is not reliable long term collateral for a bank to hold for a loan. The political risk becomes too high for investors/Banks.
(b) Credit Rating System: Since rating system is not established is hard for the banks to provide long term debts for people with no records. Even if the records are well established example a house, banks standards are going to differ significantly.

This results in high interest rate and short term debts. The solution to this problems are (1) Credit rating system (2) Land Policy and (3) Lower interest rate on government bonds and T-bills.

 

[nomasana]

i think kenya has already established something like this. it helps people to control access loans on either good or bad terms depending on your credit score. i think its a good thing.

 

[MaxShimba]

Good idea, but how are they going to do that? Nchi ambayo haina hata ID kwa watu wake. Tansania almost everything is cash, how are they going to create such bureaus of credits? In the USA they have SSN or ITIN OR ETI ambayo inasaidia kubuild credit unapo omba credit card or what ever. In Canada they have SIN. What do they have in Tansania?